In an effort to facilitate the development of a market for capacity reassignments, the FERC has issued a notice of proposed rulemaking (NOPR) (pdf) to lift the price cap on all transmission customers reassigning capacity beyond October 1, 2010.
In Order No. 888, the FERC determined that a transmission owner’s Open Access Transmission Tariff (OATT) must permit the reassignment of firm transmission capacity. But because the Commission could not discern a competitive market for capacity reassignments at the time Order No. 888 was enacted, it established a rate cap for those transactions. Rule changes designed to enhance competition in this secondary market were developed through subsequent Order Nos. 890 and 890-A, in which the FERC expressed the goal of removing price caps and commenced a two-year Commission staff study period.
That study is now complete and the report (pdf) was published on April 15, 2010. Using data filed by transmission providers, the FERC staff observed almost 35,000 capacity reassignments by 26 transmission providers during the period from May 2007 through the end of 2009. The number of reported transactions and volume of capacity reassigned rose dramatically over the two and a half year period. The FERC staff thus concluded that the removal of the price cap did not raise anticompetitive concerns and that resellers used the secondary market mainly to derive value from unneeded capacity.
Increased competition in the capacity reassignment market will be welcome news to project developers – including renewable project developers – as it increases access to transmission capacity that traditionally would have been fully subscribed by existing generators. Comments on the proposed rule must be filed within 60 days of the publication in the Federal Register (early July) and may be filed by mail, by hand or at the FERC website.